Jueves, 02 Marzo 2017

Proposed changes to the law on the distribution of insurance

VolverWe in the Insurance Department of Belzuz Abogados as lawyers specialists in insurance, have reviewed the draft of the Act that will replace Act 26/2006, of 17 July, on insurance and reinsurance intermediaries (hereinafter, the ‘Insurance Production Act’).

We shall outline the proposed changes, following the structure of the Bill.

Scope: It affects all the distribution channels for insurance and reinsurance, whether through the intermediation channel of agents, brokers, or bank-sold Insurance Operators, and it also affects those who buy insurance. This is one of the new features introduced by the Act, since it means that the insurance companies will also be subject to the LDSRP, thus creating a single legislative framework for the distribution of insurance.

An insurance intermediary is defined as any natural or legal person, other than an insurance company or reinsurer and its employees, and who is not an complementary insurance intermediary, who, in return for remuneration, distributes insurance.

The draft act does not distinguish between tied or exclusive agents. Intermediaries are classified as insurance agents and brokers, whether natural or legal persons.

Another notable feature is the strengthening of consumer rights. Thus insurance distributors are required to provide customers with more information before and at the time of signing the insurance policy. This information must be accurate, clear and not misleading.

Insurance intermediaries must provide the following information before the policy is signed: (i) identity and address, stating that they are acting as insurance intermediaries; (ii) whether or not they offer advice on insurance products; (iii) procedures for making a complaint and for the out-of-court settlement of disputes; (iv) the register in which they are registered and how to verify registration; and (v) whether the intermediary represents the customer or is acting on behalf of the insurance company.

Complementary insurance intermediaries have to supply information before the policy is signed on (i) identity and address, stating that they are acting as complementary insurance intermediaries; (ii) the procedures for making a complaint and for the out-of-court settlement of disputes; and (iii) the register in which they are registered and how to verify registration.

Insurance companies have to supply the following general information before the insurance policy is signed: (i) their identity and address, stating that they are an insurance company; (ii) whether or not they offer advice on insurance products; and (iii) the procedures that allow consumers to make a complaint and the procedures for the out-of-court settlement of disputes.

In the distribution of non-life insurance products, the distributor shall give the customer an ‘insurance product information document’ produced by the insurance company or intermediary that has designed the product.

To avoid conflicts of interest, the draft LDSRP requires distributors to state the type of remuneration they receive (commission/fees). All this is set out in article 10, emphasising that the intermediary is always deemed to be the custodian of the amounts received from his customers for the payment of premiums, and the sums received from the insurance company for the payment of indemnities or refunded premiums. He is obliged to keep his general accounts separate from those into which customers’ funds are transferred.

Cross-selling, consisting of the distribution of packages that combine insurance with other goods or services, is also regulated.

When the insurance is the principal product, the distributor will be required to inform the customer whether it is possible to buy the different components of the package separately. The distributor will also have to describe the products and provide evidence of the costs and charges and inform the customer of the way in which their interaction might modify the risk or the insurance cover.

If the insurance is an ancillary product, the distributor of the insurance shall offer the customer the possibility of buying the good or service separately.

The aim of the Draft, like that of the Directive, is to ensure that insurance and reinsurance intermediaries adhere to high professional standards.

The penalties for malpractice are much higher than the pecuniary sanctions laid down in the Insurance Production Act. Thus, in the case of legal persons they can be up to 5 million euros or 5% of annual turnover. In the case of natural persons, the maximum figure is 700,000 euros. In addition, a distributor can be disqualified from working in the business for up to 10 years in the case of very serious violations.

Conclusion: Although this is just a first draft, it seems unlikely that it will be subject to many alterations. Once it becomes law, we will offer you a detailed analysis of each of the elements involved in the distribution of insurance.

 Jose Garzon Garcia - Departamento del SeguroJosé Garzón García 

Director del Departamento de Derecho del seguro | Madrid (España)

 

Belzuz Abogados SLP

La presente publicación contiene información de carácter general sin que constituya opinión profesional ni asesoría jurídica. © Belzuz Abogados, S.L.P., quedan reservados todos los derechos. Se prohíbe la explotación, reproducción, distribución, comunicación pública y transformación total o parcial, de esta obra, sin autorización escrita de Belzuz Abogados, S.L.P.

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